Exam 17: Stabilization in an Integrated World Economy

The short run aggregate supply (SRAS) curve shifts left when oil supply shocks occur because

If a group of economists believes the following points are TRUE, which is likely to be their policymaking stance? ∙ Aggregate demand shocks have no long run effect on real Gross Domestic Product (GDP) or unemployment. ∙ Pure competition is widespread throughout the economy. ∙ Real wages are flexible. ∙ The Phillips Curve trade-off does not exist in the long run.

-Refer to the above figure. Unexpected contractionary monetary policy has caused the aggregate demand curve to shift to AD2. In the short run

One result of an unanticipated reduction in aggregate demand would be that

-Use the above figure. Graph ________ correctly depicts the short-run Phillips Curve.

Structural unemployment may result from all of the following factors EXCEPT

What is meant by the natural rate of unemployment?

If the price of sugar changed in the market from 20 cents to 25 cents per pound, and Sunharvest Grocery Market didn't change the price it charges for the sugar, this behavior is likely due to

An unexpected increase in aggregate demand

Real business cycle theory explains changes in employment and output by focusing on

Suppose a constitutional amendment is passed that mandates a balanced federal budget every year and the President and Congress consistently carry this mandate out. This would be an example of

In the aggregate supply-aggregate demand model, if every person in the economy correctly anticipates the inflation rate, the unemployment rate will

According to the policy irrelevance proposition, the impact of an anticipated expansionary monetary policy will be to

A hypothesis that assumes that people combine the effects of past policy changes on economic events and their own judgment about future effects of current and future policy changes is known as

The shorter is the interval between firms' price adjustments,

The rational expectations hypothesis suggests that

Economists who favor policy activism argue that the United States economy is NOT always in equilibrium because

-In the above figure, suppose the economy is currently in equilibrium at point C. Applying rational expectations theory, what happens if the Fed announces that it is decreasing the money supply and follows through on its statement?

Costs of renewing contracts or printing new price lists are known as

An economist who would most likely use active policymaking would support which of the following conclusions?